| The following events apply to The Ice Cream Parlor for the 2014 fiscal year: | | | | 1. | The company started when it acquired $18,000 cash from the issue of common stock. | | 2. | Purchased a new ice cream machine that cost $16,200 cash. | | 3. | Earned $20,700 in cash revenue. | | 4. | Paid $12,000 cash for salaries expense. | | 5. | Paid $3,000 cash for operating expenses. | | 6. | Adjusted the records to reflect the use of the ice cream machine. The machine, purchased on January 1, 2014, has an expected useful life of five years and an estimated salvage value of $2,900. Use straight-line depreciation. The adjusting entry was made as of December 31, 2014. | 4. value: 10.00 points Required information | Required | | a. | Record the above transactions in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA) and net change in cash (NC). The letters NA indicate that an element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.) | |
| | | THE ICE CREAM PARLOR | | Horizontal Statements Model | | Event | Balance Sheet | Income Statement | Statement of Cash Flows | | Assets | = | Equity | Revenue | | Expense | = | Net Income | | Cash | + | Equipment | | Accumulated Depreciation | = | Common Stock | + | Retained Earnings | | 1. | 18,000 | + | | | | = | 18,000 | + | | | | | = | | | | | 2. | (16,200) | + | 16,200 | | | = | | + | | | | | = | | | | | 3. | 20,700 | + | | | | = | | + | | 20,700 | | | = | 20,700 | | | | 4. | (12,000) | + | | | | = | | + | | | | 12,000 | = | (12,000) | | | | 5. | (3,000) | + | | | | = | | + | | | | 3,000 | = | (3,000) | | | | 6. | | + | | | 2,660 | = | | + | (2,660) | | | | = | | | | | Bal. | 7,500 | + | 16,200 | | 2,660 | = | 18,000 | + | (2,660) | 20,700 | | 15,000 | = | 5,700 | | | |
